Could you please look this over to see if I did it right? I really need help wit
ID: 2567883 • Letter: C
Question
Could you please look this over to see if I did it right? I really need help with #4.
Lane Company manufactures a single product that requires a great deal of hand labor. Overhead cost is applied on the basis of standard direct labor-hours. Variable manufacturing overhead should be $3.60 per standard direct labor-hour and fixed manufacturing overhead should be $1,140,000 per year The company's product requires 4 pounds of material that has a standard cost of $7.00 per pound and 1.5 hours of direct labor time that has a standard rate of $12.80 per hour The company planned to operate at a denominator activity level of 150,000 direct labor-hours and to produce 100,000 units of product during the most recent year. Actual activity and costs for the year were as follows Number of units produced Actual direct labor-hours worked Actual variable manufacturing overhead cost incurred Actual fixed manufacturing overhead cost incurred 120,000 195,000 $ 429,000 $ 1,170,000 Required 1. Compute the predetermined overhead rate for the year. Break the rate down into variable and fixed elements. (Round your answers to 2 decimal places.) Predetermined overhead rate Variable rate Fixed rate S 11.20 per DLH S 3.60 per DLH 7.60 per DLH S 2. Prepare a standard cost card for the company's product. (Round your answers to 2 decimal places.) Direct materials Direct labor Variable overhead Fixed overhead Standard cost per unit 1.50 DLHs at 1.50 DLHs at 1.50 DLHs at 4 poundsat 7.00 per pound$ 28.00 S 12.80 per DLH S 3.60 per DLH S 7.60 per DLH 19.20 5.40 11.40 $ 64.00Explanation / Answer
As you have asked help for 4th part, i am doing the same.
4. a. Variable Overhead efficiency Variance- The difference between the amounts of variable overhead that has been recovered & the amount which would have been recovered had been the actual hours worked at standard efficiency.
Variable Overhead Efficiency Variance = Standard variable overhead rate per hour * (Actual hours – Standard hours of actual production)
= $3.6 per labor hour (195,000 - (150,000 / 100,000 x 120,000))
= $3.6 x 15000 = $54,000 Unfavorable
b. Variable Overhead Rate Variance = Actual variable overhead – Standard variable overhead
Standard Variable Overhead = Actual Hours x Standard rate per hour
= 195,000 x $3.6 = $702,000
Variable overhead rate variance = $429,000 - $702,000 = $273,000 favorable
c. Fixed overhead Volume Variance - The amount of any under- or over-recovery of overheads which arises because of difference between the actual output & the budgeted is measured by the fixed overhead volume variance.
Fixed overhead volume variance = (Budgeted hours – Standard hours of actual output) * Standard fixed overhead rate per hour
Budgeted Hours = 150,000
Standard Hours for Actual Output = Standard Hours per unit x Actual units
= 150,000 / 100,000 x 120,000 = 180,000
Standard Fixed overhead rate per hour = $1,140,000 / 150,000 = $7.6 per hour
Fixed overhead Volume Variance = (150,000 - 180,000) x $7.6 = $228,000 Unfavorable.
d. Fixed Overhead budget Variance = Actual Cost - Budgeted Cost
= $1,170,000 - 1,140,000 = 30,000 Unfavorable